Pivot to the future | How firms should evolve to keep up with changing trends

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Updated: September 8, 2019 6:04:34 AM

How companies should continuously evolve to keep up with changing trends and technology.

Indra Nooyi played a key role in changing Pepsico’s strategic direction to help it keep growingIndra Nooyi played a key role in changing Pepsico’s strategic direction to help it keep growing

In 2010 Pepsi realised that what worked so well for them for decades would not do so in future, what with the anti-cola lobby gaining ascendency. Health and environment activists were on a winning spree with proven theories on the ill effects of consuming colas. Indra Nooyi got into the act to change strategic direction to keep the company growing. There was now a threefold strategy put into action which had products that were ‘fun for you’, ‘better for you’ and ‘good for you’. Therefore, the restructuring was in place to ensure that continuity was maintained and that the company will continue to grow. Companies in the retail space such as Sears, on the other hand, were not able to see the blow coming as technology pervaded the world and malls went out of fashion and online shopping caught on, with the likes of Amazon sweeping traditional retailers out of business. Companies hence have differing ability to foresee such threats and take necessary action. Some survive and continue to grow while others perish.

Pivot to the Future is another book that tells firms how they should be on alert to smell major changes taking place that have to be leveraged or countered depending on the situation. Abbosh, Nunes and Downes in this book lay down firm rules about what should be done and point towards the pitfalls on the way. Such templates are very common where experts in the academic field or practitioners draw on their experiences to draw up such rule books. These presentations on how to plan for the future are as common as conjecturing what the world will or should look like in all books with titles that are suffixed with 2.0 or 3.0.

We all know that technology has been a major disruption, which can come in different forms right from the way in which we do business like retailing, to the use of higher forms like AI to do our work. Similarly, we know that environment is a major challenge and governments and regulators will be doing their best to put curbs. Electric vehicles will be the future at some point of time, which will lead to obsolescence of several related traditional industries. Yet we observe that what these authors see as logical, which the reader will agree with, is never prophesied by several very large companies that spend a lot of time on strategic planning.

The authors build their theory on the foundations of what they call ‘trapped values’, which provide the pivot to steer away from these pitfalls. Trapped value according to them resides in four buckets. The first is society where there is failure to engage profitably to solve societal issues, such as the need to deal with the environment. The second is with consumers where value gets trapped in underused private assets such as vacant homes in popular tourist areas that can be rented. The third is industry where value is trapped by lack of cooperation and investment in shared infrastructure such as charging stations for EVs. Last is enterprise, where value gets trapped in limited use of digital technologies to transform business.

The authors also drive home some basic characteristics that go with successful organisations. The first is courage to accept that the present offerings are not going to be that appealing in future and there is need to embrace technology and bring about innovation in business tools and management approaches. The second is to be patient for success, as no start-up or enterprise clicks from the first year. The third is to be generous in the sense that as an enterprise succeeds, various customers and partners also tend to benefit probably even more as they save on the cost of experimentation. Fourth, enterprise needs to be realistic as some investments don’t work out and the cost in terms of time, effort and money has to be accepted.

For pivoting the organisation, the authors also talk of anchors that go beyond innovation, which are interesting. These are financial pivots such as fixed assets followed by working capital and human capital. The telecom industry is a good example, which explains how much fixed assets are appropriate and at what point it becomes a liability. Consumer-oriented firms have to take a call on working capital inventory to match the changing tastes of consumers. Finally, human capital is another factor today that becomes a pivot as skill sets become less relevant with the advent of technology.

The authors also talk of a ‘people pivot’ which involves mindsets of both leaders and employees. Often leaders are good at operations but not at thinking far. In fact, most stories of failure can be traced to leaders who could not see the change coming. Employees will always be diverse and getting the right future set is a challenge as skill sets vary. Therefore, their response to these changes is important so that the morale of the employees is always high, which is achieved through training and making them more flexible in mindset.

(The author is chief economist, CARE Ratings)

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